Most importantly, though, the inflation projections have been ramped up, with headline CPI set to go well above 4% over the next few quarters, as non-tradable inflation trends sideways but tradables (e.g. fuel) push up towards 6%. Of course, all of this is well above the RBNZ’s 1-3% medium-term inflation target, even though the subdued economy and soft labour market should have a restraining influence to some degree.
As such, the forward OCR track has been revised and now goes from 2.25% to 3.00% by early 2027, implying three increases over the next 4-5 meetings.
The voting records show a 3-3 split of members voting for no change versus those wanting a rise today. Governor Breman voted no change, so she had the casting vote – but you’d have to think the tightening cycle now looks set to start as soon as July. This suggests that mortgage interest rates have further to rise but given they’ve already increased ahead of today’s decision anyway, it’s not necessarily a one-for-one pass through.
On balance, the housing market outlook probably hasn’t changed too much as a result of this updated information. It’s already looking pretty sluggish, with sales making a soft start to 2026 and prices in many parts of the country flat at most. Listings are still elevated and it’s a market firmly in favour of buyers, or at least those who have high job security.
In the current environment, as mortgage rates trend higher, 2026 looks set to be another ‘sideways’ year for the housing market. Indeed, having previously indicated a rise of around 10% for sales volumes in 2026 (from about 90,000 to 100,000 in round numbers), the model now points to stability at around 90,000 being a good result.